Senior government officials in France are ratcheting up their fiery rhetoric against the British economy in the wake of Prime Minister David Cameron’s controversial decision not to support a new European Union (EU) treaty that every other member of the bloc voted for.
This new “war” between Paris and London now features some French lawmakers claiming that Britain’s economy is in far worse shape than France’s and that global credit ratings agencies should downgrade the UK before France.
Speculation has been rising that Paris is in danger of losing its AAA-rating following a warning from Standard & Poor’s.
However, on Friday, French finance minister Francis Baroin proudly told Europe 1 radio: The economic situation in Britain today is very worrying, and [one would] rather be French than British in economic terms.”
Earlier, Baroin told the French parliament that Britain is becoming “marginalized” in Europe.
Great Britain is in a very difficult economic situation, a deficit close to the level of Greece, debt equivalent to our own, much higher inflation prospects and growth forecasts well under the euro zone average, he said.
It's an audacious choice [to veto the EU treaty] the British government has made.
On Thursday, Christian Noyer, the governor of the Bank of France, told a French newspaper that ratings agencies “should start by downgrading Britain which has more deficits, as much debt, more inflation, less growth than us and whose credit is collapsing,”
Noyer also said: The [potential French] downgrade does not appear to me to be justified when considering economic fundamentals.
In response, Cameron’s coalition government, which is already facing rising unemployment and massive discontent from public sector unions, claims it has a solid plan to stimulate the economy.
Downing Street has also assured that it will continue to participate in Euro zone summit talks.
We have put in place a credible plan for dealing with our deficit and the credibility of that plan can be seen in what has happened to bond yields in this country, said a statement from Cameron’s office.
Credit ratings are a matter for credit rating agencies but we've put in place a credible deficit reduction plan and you can see that credibility in the UK's bond yields.
Some British Conservative politicians have also attacked Noyer.
David Ruffley, a Conservative member of the Treasury select committee, told British media. “This is another example of Gallic self-delusion on an epic scale. They are tied to a currency that could become a basket case at any moment.”
According to the Daily Telegraph, Jesse Norman, another Conservative Treasury committee member, said: “The view of the ratings agencies does not simply reflect the fundamentals of the French economy, but also the continuing failure to resolve the euro zone crisis. At root, this is an expression of anxiety at a failure of political leadership in the euro zone.”
Chris Morris, a BBC correspondent on Brussels, called Noyer’s comments “rather extraordinary.”
“There is a sense that the markets are waiting for a decision from the ratings agencies on whether France will lose its cherished AAA credit rating,” Morris wrote.
“French [government] ministers have already said it would be regrettable, but not disastrous…. Noyer also said the [ratings] agencies had become incomprehensible and irrational. It is another sign of the sense of frustration across the euro zone that last week's summit seems to have done little to calm the financial markets. Already there are political disputes brewing about the proposed new treaty which all EU member states except Britain have agreed to consider.”
Capitol Economics Ltd. of London commented on the brouhaha, by saying that France is much more likely to be downgraded before the UK.
“Diplomatic relations between the UK and Europe worsened again last week following suggestions by French officials that the ratings agencies should be turning their attention to the UK rather than France,” the group stated.
“But while the fiscal and economic indicators in both countries are broadly similar, France is clearly much more vulnerable to the euro-zone crisis. Indeed, we think that the UK’s relative safe-haven status is secure for now.